BLBG:Euro-Area Economic Confidence Rises More Than Estimated
Economic confidence in the euro area rose more than economists forecast in January, adding to signs that the 17-nation currency bloc may be emerging from a recession.
An index of executive and consumer sentiment rose to 89.2 from a revised 87.8 in December, the European Commission in Brussels said today. That’s the highest since June. Economists had forecast an increase to 88.2, according to the median of 30 estimates in a Bloomberg News survey.
European Central Bank President Mario Draghi said last week economic activity is “stabilizing at a very low level” and Germany’s Bundesbank expects Europe’s largest economy to rebound in the first quarter from a contraction at the end of 2012. At the same time, service industry output in France slumped this month and economists estimate that the euro area’s second- biggest economy will fall into a recession in the first quarter.
“The improvement in financial markets is starting to show some effect on business confidence,” said Jennifer McKeown, senior economist at Capital Economics in London. “But it is a very slow process and it is too soon to suggest we are seeing a real recovery in the euro area.”
The euro was little changed against the dollar after the data were released and traded at $1.3530 at 11:06 a.m. in Brussels, up 0.3 percent on the day. The Stoxx Europe 600 Index was down 0.2 percent to 289.75.
First-Quarter Stagnation
The euro-area economy shrank 0.1 percent in the third quarter after a 0.2 percent contraction in the three previous months. Gross domestic product probably fell another 0.4 percent from October to December and will stagnate in the first quarter of 2013, according to another Bloomberg survey. The European Union’s statistics office in Luxembourg is due to publish GDP data for the fourth quarter on Feb. 14.
A gauge of sentiment among European manufacturers improved to minus 13.9 from minus 14.2 in December, today’s report showed. An indicator of services confidence rose to minus 8.8 from minus 9.8, while consumer sentiment climbed to minus 23.9.
While policy makers are cautious to call an end to the three-year-old debt crisis in the euro area, they are starting to become more optimistic.
“The fire is under control,” German Deputy Finance Minister Steffen Kampeter told the BBC in a radio interview broadcast yesterday. “But we have to take care it will not start again.”
Common Currency
SAP AG (SAP), the biggest maker of business-management software, on Jan. 23 forecast at least a 12 percent gain in full-year earnings as the company adds Internet-based programs to attract users.
Financial markets have calmed and stocks have rallied since Draghi in July announced the ECB’s bond-purchase plan. While this has reduced the probability of a breakup of the common currency, the economic environment still remains “challenging,” ECB Executive Board member Peter Praet said yesterday.
The Frankfurt-based central bank estimates the euro-area economy will shrink 0.3 percent this year before finding its way back to a full-year growth rate of 1.2 percent in 2014. The unemployment rate rose to a record 11.8 percent in November and economists forecast another increase to 11.9 percent in December, according to the median of 34 estimates in another Bloomberg News Survey.
RWE AG (RWE), Germany’s second-biggest utility, plans to counter a “challenging” year by cutting investments by as much as 50 percent to offset losses from the phasing out of nuclear power in the country, Chief Executive Officer Peter Terium said on Jan. 27.
“The crisis is not over yet,” said Christian Ott, an economist at Natixis Securities in Frankfurt. “There is some small progress but the economic situation isn’t yet stable at all.”
To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
